The Big Drip: Profit’s Place in the Water Business

This is part of a series of articles by MBA students at California College of the Arts dMBA program. Follow along here.

By Aki Akinola

Notice anything different in your tap water lately? Perhaps a change in water pressure, an unusual smell or an unpleasant taste? If so it could be due to the fact that the water you use isn’t controlled by your local municipal system or even by your state, but rather a large multinational corporation. Globally, environmental corporations including RWE, Vivendi, and Suez have a strong hold on municipal water systems in major cities and even in developing countries. Time after time they’ve exercised their power with relative disregard for human and environmental impacts.

But let’s backtrack. Why would your local water municipality hand over power to a French corporation like Suez?

Many municipalities have aging or obsolete water service infrastructure that requires enormous investment to upgrade or replace. Lots of publicly-owned and publicly-operated water utilities, especially small and medium sized ones, “lack the financial capacity and scale of operations to make the impending investments required without immediate, severe rate increases for water service.”

So rather than have us consumers foot the bill, big business serves as Superman, sweeps in and saves the day.

Not quite.

Unbeknownst to the municipality, the private water corporations have already identified which U.S. public water systems are potentially profitable to own or operate. They show boat their financial capacity to cash strapped municipalities, alluring local water systems who find privatization proposals an attractive means of meeting costly regulatory, infrastructure and performance requirements.

What results of the dog and pony show in for profit water are often social, environmental, and economic implications.

Naturally, privatization of public water supplies creates dilemmas involving inefficiency and accountability.

In 1999, the city of Atlanta, Georgia signed a 20 year contract to transfer management of its water system to United Water (Suez); after only 4 years the city canceled its contract. But not before United Water swiftly downsized the workforce by 400 jobs, accumulated a maintenance backlog of 14,000 work orders, and delayed repairs. In addition, the company failed to collect late bills or to read, install and maintain water meters. United Water wound up actually costing the city of Atlanta millions of dollars. The city said United Water submitted bills for work it didn’t do and even worked on other contracts while on Atlanta’s dime.

A similar story was illustrated in Lee, Massachusetts in 2004, where Veolia Environmental Services actually responded to the town’s advertisement for a private operator. Veolia claimed that it could save the city $6 million over 20 years, but residents grew uneasy with the arrangement when they read the fine print. The contract gave Veolia the right to set rates to handle trucked-in waste from outside of Lee and moreover lacked a credible cost estimate against which the promised savings could be measured. After initially favoring the deal, town representatives overwhelmingly voted against it.

In big business it is understood that cash is king; corporations push ethics aside to be profitable. But when if ever does revenue become an added bonus to producing the best product or service – of a public good in particular- for consumers?

When I was a child and purposely committed wrongdoing my father would chastise me by forcing me to reflect on those actions and the ensuing repercussions. He would end his lecture by saying “what do you think of yourself?”

So I’d like ask a question to the multinational corporations in the public – private water business who willingly transgress.

Aki Akinola is an MBA in Design Strategy student at California College of the Arts. He recently worked for as a corps member in the Teach for America organization and as a style assistant at The Fader Magazine. Currently he is the Creative Director of Anomalous Sightings, a photography and video production company focused on creating images deviating from the norm. Follow him on Twitter @aki_a_dmba.

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